Koskinen was widely expected to clear the Senate after a friendly confirmation hearing last week. He now faces the seemingly insurmountable task of restoring public trust in the agency accused of targeting tea party groups seeking tax exempt status for extra scrutiny. A May inspector general report blasting agency workers for the practices set off a firestorm and led Obama to push out the then acting chief.

“I have a yellow legal pad. In one column are my friends and in the other are the people who think this is a good idea,” he said jokingly after his Senate Finance hearing last week.

Obama’s choice has a history of donating to Democratic candidates, including Hillary Clinton and Florida Sen. Bill Nelson, but won high praise from several Senate Finance Republicans who vetted Koskinen.

Koskinen, 74, has earned a reputation as a fixer. He stepped in to lead Freddie Mac during the dark days of the financial crisis and worked in the Office of Management and Budget during multiple Clinton-era government shutdowns.

Those skills will be put to the test as he’ll officially join the agency about a month before tax season begins.

But the top priority for Koskinen will be to restore public trust in the agency.

Acting IRS Commissioner Daniel Werfel published a report over the summer outlining management flaws faulted for the targeting program he intended to correct, including installing a chief risk officer. Koskinen will be charged with seeing many of those recommendations through.

“Really his first assignment is to restore the credibility of the agency. He will have to work closely with the Congress, with frequent visits to the Hill when they request to see him,” said former IRS commissioner Mark W. Everson, now with alliantgroup, which advises business on tax issues.

That added scrutiny by IRS workers of tea party groups - and some liberal groups, Democrats contend - prompted the Obama administration to propose new regulations that could have a sweeping impact on how 501(c)4 groups participate in elections.

It will fall on Koskinen’s shoulders to approve the final rules after the IRS collects feedback.

That could prove to be a potential pitfall early on for the new commissioner. Both conservatives and liberals groups argued that the regulations may stymie free speech - a threat Republicans in Congress promised to closely watch.

“The regulation released today continues this Administration’s unfortunate pattern of stifling constitutional free speech,” House Oversight Committee Darrell Issa said when the proposed rules were announced in November.

Obamacare will also be a top issue.

The IRS has emerged from the botched rollout of Obamacare without harm — but that could change in 2014. The IRS has reported its systems are operating correctly, but an inspector general’s report raised concerns that the premium tax credits included in the 2010 law could be susceptible to fraud.

How the agency responds to any Obamacare glitches will be pivotal if Koskinen wants to save the IRS from the harsh criticism now facing the Department of Health and Human Services.

The IRS is also suffering - in part from the intense reaction to the targeting - from plummeting employee morale. Everson, a George W. Bush appointee, said Koskinen will need to strike a new “tone” to stop employee turnover.

“People are demoralized because of certain events and he needs to reassure the rank-and-file people in the agency that it’s okay to your do you job,” Everson said.

The shrinking IRS budget will also be a challenge for Koskinen. Congress has cut nearly $1 billion from the IRS budget since 2010, forcing employees to double-up on jobs and leave posts unfilled.

The Government Accountability Office on Wednesday released a report saying the IRS “was unable to keep up with demand for telephone and correspondence services” during the 2013 filing season because of a budget crunch.

Obama’s budget called for additional IRS resources but that proposal is a no-go among congressional Republicans whose distrust of the agency spiked during the tax exempt controversy.

During his confirmation hearing earlier this month, Koskinen expressed concerns that the agency’s tax collections could falter if Congress continued to reduce the budget.